Washington Insider -- Wednesday

Washington Policy Breather

Here’s a quick monitor of Washington farm and trade policy issues from DTN’s well-placed observer.

Lighthizer to Lead China Trade Negotiations

President Donald Trump named U.S. Trade Representative (USTR) Robert Lighthizer, a China hard-liner, to lead negotiations with Beijing. The move signals Trump will pursue a tough stance in upcoming talks. Lighthizer helped Trump ditch potential deals with Beijing over the past two years and has been pressing for more tariffs on China to build leverage.

Chinese leadership wanted to deal with Treasury Secretary Steven Mnuchin, who had led initial rounds of talks, but failed to resolve prior disputes.

"We expect to make a lot of progress" on trade negotiations within the first 90 days, Mnuchin said on Fox Business Tuesday morning, while acknowledging U.S. and China won’t accomplish everything in that timeframe. Mnuchin said agriculture will be first up in trade talks with China. "Our expectation is that there will be specific deliverables" and timelines from China, and "without reciprocal tariffs.”

He said Trump has been focused on the "structural" issues such as forced transfers and IP protections. Agriculture, liquefied natural gas and the auto industry have been given commitments as part of the deal, Mnuchin said, adding there are 142 structural changes being discussed. “It will be the structural changes that lead to U.S. companies being able to compete fairly.”

USDA Trade Missions in 2019 Aim to Broaden US Ag Exports

USDA announced six trade missions the agency will conduct in 2019 that are aimed at broadening exports of U.S. ag products. But an underlying signal is likely that the U.S. wants to lessen its reliance on China as a market for U.S. ag products.

“While we’re all worried about China and its impact on our business, I say that we probably became too dependent on one customer,” Perdue said Monday at an Illinois Farm Bureau event in Chicago.

The trade trips will include Colombia, Kenya, Vietnam, Canada, Mexico and the United Kingdom.

USDA picked countries that “offer the best prospects for sales of U.S. farm and food products,” said USDA Undersecretary for Trade and Foreign Agricultural Affairs Ted McKinney, who led several trade delegations this year, including recent trips in South Africa and South Korea.

China bought $19.6 billion in agricultural products in 2017, more than any country except Canada. Perdue said McKinney “is trying to develop a market that would benefit us for the long-term future not to be held hostage to one major customer, as we’ve been this year.”

Washington Insider: Washington Policy Breather

The House is holding off on votes this week to pay respects to George H. W. Bush, putting Republicans’ tax efforts in limbo, delaying the farm bill conference report, and canceling committee hearings.

A Friday funding deadline will also be postponed, with lawmakers aiming to use a two-week stopgap measure to prevent a partial government shutdown as they try to iron out border wall money.

The report says lawmakers plan to avert a partial government shutdown at the end of the week with a two-week stopgap measure, giving the fight over funding Trump’s border wall a new deadline. The stopgap is to last two weeks, pushing the deadline back from Dec. 7 to Dec. 21, the report said.

Trump also said over the weekend that he could support a two-week stopgap budget measure for agencies that aren’t funded for fiscal 2019, delaying a potential federal shutdown until after services for Bush. That would cover funding for the Treasury, Justice, Commerce, State, Transportation, Interior and Agriculture departments, among others.

The two-week spending extension would need the consent of all Republicans and Democrats in the Senate as well as the House. House Democrats won’t object to a unanimous consent request for a two-week measure, a House Democratic aide told Bloomberg.

While that stopgap would prevent a shutdown this Friday, lawmakers and the president don’t appear any closer to an agreement on border wall funding--and there is no consensus among negotiators how long they should continue to rely on stopgap measures.

A House vote on the proposed Republican lame-duck tax package is further delayed after leadership canceled all votes this week. The bill, introduced by House Ways and Means Chairman Kevin Brady, R-Texas, on Nov. 26, and was originally slated to go to the floor as early as Nov. 30, but disagreements over some of its provisions ended up delaying that vote. Sticking points include language extending an excise tax on coal companies, paired with low turnout from members who lost their midterm races.

Brady said last Friday he was still working to garner support for the bill, but gave no indication of when the full chamber vote would occur. The House announced today it was clearing the floor schedule and that the next votes would take place on Dec. 10.

A farm bill conference report also likely won’t be released until next week, Bloomberg said. House and Senate Agriculture leaders Mike Conaway, R-Texas, and Pat Roberts, R-Kan., along with ranking Democrats on their panels, said last week they have reached a tentative deal, without detailing all the provisions.

In the meantime, there is disagreement over what was agreed during President Trump’s meeting with the Chinese president. For example, Treasury Secretary Steven Mnuchin said China “has agreed to eliminate tariffs on imported automobiles” but declined to offer details after Trump jolted auto stocks by announcing that a deal was reached.

President Trump said on Twitter late Sunday that Beijing promised to “reduce and remove” tariffs on American-made vehicles – but the lack of details raised even more questions about the outcome of the recent meeting with counterpart Xi Jinping.

Larry Kudlow, Trump’s top White House economic adviser, later said the Chinese are “going to roll back their auto tariffs,” adding “That’s got to be part of the deal.” Kudlow also said Washington and Beijing are “pretty close” to a deal on stopping intellectual property theft. The White House also wants to end subsidies for electric vehicle purchases, Kudlow said, without indicating how it would eliminate the incentives that were created by Congress.

So, we will see. There has rarely been more confusion over policies as important as trade as there seems to be at this time. The President claims that a far reaching trade deal was reached in Argentina, but not only are details scarce but there seems to be widespread disagreement over what will happen next, and what it might mean.

Thus, the “time out” for President George H. W. Bush’s funeral seems to be necessary for all parties to regroup and clarify recent events and future prospects, a process producers should watch very closely as it proceeds, Washington Insider believes.

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